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Comment by CapeTheory | Hacker News Reader

The DAX is only 40 companies, most of which make real products rather than advertising mechanisms. Making real physical things just doesn't scale, and never will.

While I would enjoy a US tech salary, I'm not sure we want a world where all manufacturing is set aside to focus on the attention economy.

Nvidia value deserves to be much higher than any company on the DAX (maybe all of them together, as it currently is) - but how much of that current value is real rather than an AI speculation bubble?

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> Making real physical things just doesn't scale,

Nvidia sells chips ...

Investors don't even know what NVIDIA is selling, I was listening to a random investor podcast and they were talking about Intel, AMD and NVIDIA, but no one knew what exactly they are selling, they only knew they are part of this AI bubble so that's why you should invest in them

What about seroous analysts, say like morningstar, don't the undedtand the business that they recommended relatively well?

They can't make them fast enough to satisfy hype-driven demand; they are not scaling like a tech company, but their market cap is being inflated like one.

What is the meaning of "tech" in this context? "Software"? I mean, if Nvidia isn't a technology company...

Sorry should have said "big tech", as commonly used to refer to FAANG companies who focus more on software and/or services.

Nvidia is a fabless chip designer. They design chips and software to go with the chips, but contract out the actual manufacturing.

Yes, they buy these chips from fabs (made to their design) but it is the chips they then sell on, at about a 4x markup to what they bought them for. Good business model! Buy low, sell high. Whether good enough to justify current valuation is another question.

How much of Nvidia's value do you think comes from the chips? Chips are a commodity, AMD's chips have been better and cheaper than Nvidia for many years.

The reason Nvidia's value has been so inflated is the software stack and the lock-in they offer. CUDA, CuDNN, that's where Nvidia's value lies.

And obviously, now that all relevant ML frameworks are designed for Nvidia's software stack, Nvidia has a monopoly on the supply. That's why their value is being inflated so much.

And Nvidia doesn't have produce the chips themselves, that's all contracted out as well.

> Making real physical things just doesn't scale, and never will.

Nvidia sells physical things, and they are bigger than 40 companies because the companies are selling physical things?

I am not arguing hardware scales better than software but this is a strange argument in this context.

> but how much of that current value is real rather than an AI speculation bubble?

I mean, by definition given that it trades freely their market cap is real. Your market cap today is what the market thinks your future cash flows are worth. The bubble and the bubble popping should in theory both be priced into Nvidia's market cap.

What isnt' is events the market doesn't anticipate, AMD coming out with a current generation chip that can do inference as well as the H100 is something the market hasn't priced in.

Andy our manufacturing example is very poor as NVidia is certainly part of the manufacturing pipe line by designing physical products that people buy.

> can do inference as well as the H100 is something the market hasn't priced in.

I think probability of that would still be priced in. Not sure what the exact probability is, though.

But if say it was clear that AMD can come up with a competitive option, then NVDA stock would drop. But if it was clear the other way that AMD can't do it, NVDA price would increase.

> Your market cap today is what the market thinks your future cash flows are worth. The bubble and the bubble popping should in theory both be priced into insert_financial_product_here

This is a bit of a tired viewpoint, and is evidently proven not true time after time. The collective despair/euphoria of market participants is extremely powerful and well documented, at least as far back as dutch tulips.

Stock valuations are relative, and they are relatively misvalued most of the time. That's why there are (albeit rare) funds that are capable of outperforming the market for decades - Berkshire, and Medallion for example.

It's certainly possible that AMD is valued (almost) fairly. It's just as likely that it's relatively misvalued for no reason other than emotions (lack of hype).

> The DAX is only 40 companies, most of which make real products rather than advertising mechanisms

This, as the kids say, is just cope. American big tech makes real products. Google is not just ads. Apple is not. Amazon is not. Tesla is not. NVidia is not. Netflix is not.

NVidia might be overvalued because of the current AI hype but that does not diminish their real accomplishments!

Europe has almost no real tech companies. There is one exception, founded in 1984. Not exactly a spring chicken. How can a wealthy continent with 750 million people produce no big tech companies? It's a big problem.

>How can a wealthy continent with 750 million people produce no big tech companies? It's a big problem.

Much more difficult to scale a product across 26 different countries and nearly as many languages and regulatory jurisdictions. US is one country, not a collection of countries fighting each other, meaning your product is instantly available to 300M people speaking the same language under (nearly) the same regulations.

Language aside, the entire point of the EU is the single market so you don’t have 26 different rule sets. (There are some exceptions such as health care but that is no different in the US.)

Except you do have 26 different rules.

It's a single market on paper as the eu only mandates a small subset of common rules and regulations such as removing tarrifs or freedom of movement, but have you ever tried in practice to launch your company from Belgium to France or from Netherlands to Belgium or from Austria to Germany, or from Romania to Italy?

It's much more difficult when the rubber hits the road as every country has various extra laws and protectionist measures in place to protect it's domestic players from outsiders even if they came from within the EU. And that's besides the language barrier which means added costs. This is much less efficient than the US market.

EU countries and voters still value their national sovereignty and culture (both with the upsides and downsides) above a united EU under the same laws and language for everyone, ruled from outside their country's borders. See what happened with Brexit and the constant internal squabbling and sabotaging over critical EU issues that affect us all like the war in Ukraine or illegal mass migration. An US style unification just won't work here since every little country wants to be it's own king while having its cake and eating it too.

Europe is a single market with regards to imports and exports, and that's what matters most for a business. Low wages more than compensate for regulatory annoyances. No shortage of subsidies either.

California has more burdensome regulations and higher taxes than other states and yet it's home to silicon valley.

>Europe is a single market with regards to imports and exports, and that's what matters most for a business.

We're talking about scaling internal companies across EU, not about imports and exports. And scaling local start-up across the EU is a regulatory and legal nightmare for small companies.

Shipping and selling imports and exports of commodities are a solved problem for decades, but scaling a on-line notary service for instance, that works both in Germany and in Italy, isn't. The EU doesn't help much with that as they only say you should have no tariffs between each other, not that you shouldn't have various legal, cultural and bureaucratic protectionism idiosyncrasies in place. The EU won't and can't force countries to improve that to make doing business easier for cross-country start-ups.

EU countries have a lot more roadblocks between each others than US states do when ti comes to scaling businesses.

Yes, and it's doing a mediocre-at-best job of it. You can remove tariffs and harmonise regulations, but the EU is trying to unite countries with cultural borders older than Christianity.

I would argue that the EU is quite a successful organization given the task of setting up general market rules for 26 countries.

Obviously there is a lot to criticize about the EU and I can offer you a gigantic list there too. However, I do not see any clear failure of the EU’s approach as a single market so far. Additionally part of the philosophy was establishing peace in a region that was torn up by wars for a lot longer than Christianity exists. I would argue the EU was quite successful there too.

It's definitely successful, and I was probably too harsh there. But I genuinely think the barriers that are left are damn near insurmountable. An awful lot has to change before a Greek tech workers can move to Sweden as easily as a Virginian can move to California.

What would you change if you could? The EU already offers freedom of movement to EU citizens. Of course the US being a country instead of a connection of countries offers a more streamlined experience and surely the shared language plays a huge role too. But when I want to come up with examples such as a Greek person having completely different retirement, health care and legal schemes in Sweden compared to Greece, it seems the US is not so dissimilar there either given that states sometimes have very different approaches to health care, taxes, labor laws, etc.

Mostly stuff you can't really change. Like, the cultural difference between Sweden and Greece is _way_ bigger than between California and Virginia. You've got the language barrier too. This isn't gonna be fixed, maybe ever, but will continue to cause friction.

I had two Greeks on my team at a large tech company in Sweden.

Do you think there are more Greeks in Sweden, or Virginians in Washington?

I just thought it was funny your example was my experience. But I also don't think it applies that much to tech workers, they dont need to learn swedish at all. Certainly not easy but not insurmountable as you say.

>US is one country, not a collection of countries fighting each other

The US is a republic of 50 states. Each state has a huge amount of sovereignty and autonomy. There are 50 state-level regulatory jurisdictions. Not to mention the local-level of government.

But in spite of this, the US does not over-regulate. This is the big difference to Europe (I say this as an American expat living in Europe).

Have you tried launching a product in your new EU country and then taking abroad to another EU country? You'll find out it's not exactly like doing the same thing between US states. And I'm not even talking about the language barrier.

American states have generally less autonomy than Canadian provinces do. Federalism is common worldwide, it's far from an American thing. EU countries are _vastly_ more independent than American states, and when you throw in the cultural differences, it grows hugely again.

Why is producing big companies a goal? High standards of living for all seems to a much better goal. And that can be done with small or big companies - so long as economic production is high enough and distributed well enough.

Because that famous EU welfare is funded via taxes. Having well performing companies funds your welfare system.

Currently EU welfare systems are under massive strain and huge waiting lists due to ageing population and economy that hasn't kept up to fund it.

There's no free lunch here. You need big companies with scale that pay huge wages as those mean a lot more tax revenue. Saying no to that kind money out of some made up idealism is just silly copium.

The EU income taxes paid by a single FANG salary employee would be the equivalent of the taxes paid by ~10 average workers. Pretty sure Germany and every other EU country would like to have such taxpayers contributing into the welfare system and not say no to it.

Europe's share of global GDP gas been on a constant decline at the expense of US and Chinese growth. Yeah it's nice to have a better welfare system than China or the US, but how will you fund it in the future if you keep having less money? Political idealism doesn't pay your food and rent.

Because tech innovation requires tons of R&D and you can't afford to do that otherwise. Europeans use American laptops running an American operating system to watch American movies in an American browser.

European economic production is nowhere near high enough and now Europe is struggling to provide for its aging population and doesn't have enough good jobs for younger people. I support redistribution generally, but the wealth has to be created first or there won't be anything to redistribute.

.... while all of the content is hosted on Linux servers, and you're listening to music through a Swedish app. That is running on silicone made in Taiwan. Using equipment that can currently only be manufactured in Belgium and Germany. On a Mac you are using a British instruction set.

Also in terms of tech innovation: What part of the US-based tech innovation couldn't have been (and actually were) achieved with open-source solutions many many years earlier for a fraction of the cost, if we didn't have copyright?

Honestly, a significant chunk of the "innovation" seems to relate directly to maximizing advertisement opportunities and inducing increased consumption. Who cares if a website takes a second to load rather than 0.1 seconds? If it has content I want, 1 second isn't a big deal. If I don't care about the content, I lose nothing by being distracted by something else in that 1 second.

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More importantly:

European Economic production isn't high enough... by what standard?

https://data.oecd.org/lprdty/gdp-per-hour-worked.htm

GDP per hour worked is 74 in the US vs 69 in Germany and 54 in the EU. And the EU includes many large countries that emerged from communist dictatorship only 35 years ago, and are very much still in the process of catching up. Incidentally, the German economy is the result of the West German economy with 63 million people absorbing a failing economy hosting 16 million people in 1990.

The idea that the US is some promised land of economic prosperity while Europe is falling is entirely absurd. It's a narrative built on small relative differences and a US system that pressures people into working a lot more than Europeans do.

More importantly, even GDP per Capita wise:

https://data.oecd.org/gdp/gross-domestic-product-gdp.htm

EU per Capita GDP in 2022 is the same as USA 2016. Was the USA in 2016 struggling but now isn't?

This is all bullshit. Economic output is more than high enough and rising steadily. The problem remains solely in the distribution of

>EU per Capita GDP in 2022 is the same as USA 2016. Was the USA in 2016 struggling but now isn't?

Absolutely the US would be struggling if the GDP was still 2016 values with today’s costs.

Pretty much. I'd also love it (European) if we stil had 2017's rent prices and consumer prices, but we don't. Housing, energy, food, healthcare and everything has gone up like crazy. We're definitely poorer than before, just sweeping it under the rug pretending everyting's fine.

So it boggles my mind that your parent tried to make a point by equating USA 2016 with EU 2022 GDP/capita as if nothing's wrong with that. Are some people that oblivious?

The 2017 number was a mistake by me, I wanted to look at inflation adjusted/PPP, and that was nominal. You can clearly see the massive effect of the Russian invasion of Ukraine and the resulting inflation in the data. If we were looking at nominal values, the opposite is the case: Nominally GDP is rising rapidly:

Nominal: https://data.oecd.org/gdp/gross-domestic-product-gdp.htm

PPP/Inflation adjusted not so much: https://ourworldindata.org/grapher/gdp-per-capita-worldbank?...

But pretty much all countries are still well ahead of where we were in 2017. If you feel poorer than in 2017 it's because you're getting less of a larger pie, not because the economy is producing less than it did then.

Can't edit anymore, but this little factoid:

> More importantly, even GDP per Capita wise: > > https://data.oecd.org/gdp/gross-domestic-product-gdp.htm > > EU per Capita GDP in 2022 is the same as USA 2016. Was the USA in 2016 struggling but now isn't? > > This is all bullshit. Economic output is more than high enough and rising steadily. The problem remains solely in the distribution of the ouptut.

The conclusion that economic output has been rising steadily, even in the last couple of years, is true. But the 2016 vs 2022 numbers are nominal, thus useless. There is a much more significant difference over time when working in PPP/Inflation adjusted numbers:

https://ourworldindata.org/grapher/gdp-per-capita-worldbank?...

The overall point holds though: The economic output of the EU is at 45K per capita today, the level of the US in 1997. The US was not a poor country in 1997. Germany is at the economic output per capita of 2009.

Did the US in 1997 suffer from the problem that it didn't produce enough economic output? Of course not.

And given that, adjusting for inflation, GDP per capita is at an all-time high, the conclusion that you're poorer because economic production is distributed to others is necessarily true. And it tracks, too. Corporate profits and the Dow Jones are not down. The already extremely wealthy have accumulated nearly two thirds of the new wealth being created since 2020:

https://www.oxfam.org/en/press-releases/richest-1-bag-nearly...

> Billionaire wealth surged in 2022 with rapidly rising food and energy profits. The report shows that 95 food and energy corporations have more than doubled their profits in 2022. They made $306 billion in windfall profits, and paid out $257 billion (84 percent) of that to rich shareholders. The Walton dynasty, which owns half of Walmart, received $8.5 billion over the last year. Indian billionaire Gautam Adani, owner of major energy corporations, has seen this wealth soar by $42 billion (46 percent) in 2022 alone.

Given these facts, if we have to accept lower economic production in the name of a fairer distribution of economic production, that seems more than acceptable to me.

To be fair more than half of that laptop hardware is made in China+Taiwan, including a lot of the IP that goes into it. If you look at phones and tablets, there is a bunch of components/IP from European companies also, such as ARM, Bosch, STmicroelectronics, Infineon, NXP etc. Intel has famously struggled and failed multiple times to get into that market. European semiconductor companies are also strong in automotive and other industries that use modern embedded systems. In another consumer electronics niche, a majority of wireless mice and keyboards are build on Nordic Semiconductor chips - from tiny Norway.

That's all true. However, the US is capable of producing almost everything domestically, albeit in lower volume. The US military doesn't like to depend on Chinese chips for obvious reasons.

>If you look at phones and tablets, there is a bunch of components/IP from European companies also, such as ARM, Bosch, STmicroelectronics, Infineon, NXP etc.

But those are all low-marin chips. Qualcomm, Nvidia, Intel, AMD and Apple have much higher margins on their chips. They don't bother competing with the EU chips companies.

And yet standards of living in Europe are comparable to those in the US, and preferable at the median. Our attention is captured by speculative valuations of unicorns, and yet people actually need real stuff made, drugs developed and made etc. Europe does perfectly well in many non winner takes all sectors where English language and network effects are less relevant. The political instability created by the US neoliberal experiment is something I hope we can avoid over here too.

Europe is much much poorer than the US, actually.

https://pbs.twimg.com/media/F3PGpsrWEAEiplB?format=jpg&name=...

EU GDP per capita 2022 is the same as US GDP per capita 2017.

Unless you want to say that the US was much poorer in 2017 than it was in 2022 that's a fairly ridiculous statement.

Also, the highest productivity places in the EU have much lower hours worked per capita than the US, with Germans on average working 25% less than Americans and the EU as a whole working 13% less than the US.

https://data.oecd.org/emp/hours-worked.htm

World Bank:

European Union gdp per capita for 2022 was $37,433, a 3.33% decline from 2021.

U.S. gdp per capita for 2022 was $76,330, a 8.7% increase from 2021.

It's not even close?

GDP per capita as a stand alone metric doesn't mean much.

All rich countries have high GDP per capita and all poor countries have low GDP per capita. Zero exceptions. Despite the shortcomings of GDP as a metric it still tracks prosperity very accurately.

You can't get any more obvious than that, but that wasn't my point to say that higher GDP doesn't make you richer than a low GDP, but to say GDP/capita as a number alone is not a measure of wealth, income or prosperity between countries, even in the EU.

For example Ireland has by a long margin the highest GDP/capita in the whole EU, and it would make you think the average Irish worker earns more that any other worker in the EU and drives a Lambo, but that's not what's happening. It's because most US corporations funnel their EU money through their Irish holding companies skewing the statistic.

> For example Ireland has by a long margin the highest GDP/capita in the whole EU

No, Luxembourg does.

But in both cases it's because of weird corporate tax loopholes rather than the underlying productivity or utility to the median individual.

Sources please? Are these nominal dollars?

World bank data in PPP dollars is reported as 64,600 vs 45,900 here:

https://ourworldindata.org/grapher/gdp-per-capita-worldbank?...

Germany is at 53,900 there, but a good chunk of the difference is simply that US works more per capita. GDP per hour worked is 74$ in the US vs 69$ in Germany, 53$ in Canada. Sweden is ahead of the US. And the EU also includes countries like Bulgaria, which at 29$ is barely ahead of Russias 28$.

https://data.oecd.org/lprdty/gdp-per-hour-worked.htm

France is at 65$ per hour worked, but Germany and France also have significantly lower poverty and inequality rates by any measure you chose, with France more equal than Germany.

The US, of course, remains the dominant economy of the world by any measure. There is no question of that. But the exponential nature of economics, and the structural differences between these different economies, means that GDP numbers compared directly are fairly meaningless.

Edit: That last sentence is too strong as stated. GDP obviously matters a big deal in the grand scheme of things, especially as you jump from lower or middle income to high income countries. But it's all logscale. A factor of 2 is a big deal, a factor of 1.2 might not be.

Yes, if you had 2017 salary in the US today you are much poorer. Inflation was no joke

These numbers are PPP, so inflation adjusted.

> EU GDP per capita 2022 is the same as US GDP per capita 2017.

Can't edit anymore, but: That were nominal numbers, and thus useless. See here:

https://news.ycombinator.com/item?id=40673552

These are mean figures, not median.

Big companies means efficiencies of scale. Small companies that succeed and grow inevitably become big companies. If they don't, it means the qualities that make them effective don't scale to the rest of the economy.

They become big but not necessarily huge - like the 10 biggest tech companies that people here put as the benchmark. For that one needs organizations that also continuously increases their scope - going into new markets, consolidating exiting markets, buying up existing players. And if they are to continue being "European" then they must resist being bought up by the huge US or global tech companies. The latter is a big problem at least here in Norway. We have some companies that grow quite big and successful - but it is generally just a question of time before they get swallowed by a huge corp, often with US headquarters. Example: Atmel, now Microchip

Yep, that's a huge problem, and one that isn't easy to fix. The European market is vastly more gragmented than the North American one, so even without Europe's penchant for taxes and regulation, North America can more easily get giant companies that can reach across the Atlantic.

The only real answer is protectionism, and there's a good chance that'll hurt more than it helps.

> Google is not just ads.

Bad example given how aggressively they terminate products which don't generate the same revenue as ads.

> Apple is not.

Best example, they have done a fantastic job of being both a tech company and pseudo-fashion company.

> Amazon is not.

They don't make anything (at least nothing people want to buy) and have ad revenue as an increase slice of their pie.

> Tesla is not.

Even bigger hype/speculation vehicle than Nvidia.

> NVidia is not.

Nvidia of 5 years ago would not have appeared on this list, being too much of a niche tech company. Good at what they do, but hugely hype-fuelled.

> Netflix is not.

Running out of growth potential with their current business model, starting to introduce ads!

Nvidia's valuation is in part driven by the fact that their chips potentially disrupt the vehicle for ad revenue that is search.

For all his insanity, the one thing I respect Musk for, is that he actually started successful companies that make stuff. Creating a new car manufacturer of the scale of BMW out of nothing was widely considered impossible before.

Of course he did this from a position of extreme wealth, but none of his peers managed to do that. Everyone else is just seeking rent by trying to be first to implement some tech transition that is coming anyway. And that might be a lot more valuable to society if it was managed differently...

Amazon doesn’t make anything anyone wants to buy?

Not to be snarky, but if AWS counts as “nothing” I’d sure like a slice of nothing please.

AWS is a (collection of) service(s) which can scale and have low marginal cost of reproduction. Fire Tablets are a real thing you can buy, but they are shit so nobody does.

Sorry, are you suggesting AWS Services "aren't real things"?

If I pay for a database server in Virginia, how is that not real?

I get that you meant “physical” but this blur between “advertising isn’t a useful thing for an economy to focus on” and “services are not real” is a bit of a jump!

Cloud services don’t just exist on their own accord. Datacenters are physical and real!

fortunately, it's not for a one person to decide what an economy needs or not. The demand is there and that's why we have "ad companies".

> Europe has almost no real tech companies

How do you define "tech"? Europe's domestic markets are jam-packed full of local tech companies.

The grandparent claimed that the DAX 40 has real businesses that make things as opposed to American tech businesses that just serve the attention economy. Clearly not true. European businesses run on American technology. American businesses do not run on European technology.

Europe has many small and not very profitable tech companies. Almost no large and profitable ones. https://pbs.twimg.com/media/GNDtCtTXcAAiwFk?format=jpg&name=...

> There is one exception, founded in 1984 Europe clearly has many problems stimulating investments and creating a competitive environment for startups and tech companies. But you can't say ASML is the only one "real" tech company. What about Adyen, Spotify, Klarna, N26, Revolut, etc?

Most of those companies you mentioned aren't anywhere near as wealthy or as high market caps as US big-tech.

Most of them are just payment middlemen not some innovative product nobody else can do, and Spotify survives on monopolizing and squeezing artists, not some innovative product. Kind of like Netflix except Netflix has some cutting edge streaming tech as a product not just IP licenses.

ASML is the only product innovator there except their innovative EUV lightsources are licensed from Sandia labs in the US and made by Cymer in the US which ASML bought and licensed to not seel to China. So an US invention at the end of the day.

We aren't exclusively talking about big tech here, just tech. Companies like Monzo dominate the local markets because they executed on ideas no-one else tried before. We forgot that huge, international tech companies are pretty much an exclusive American phenomenon, they don't really exist anywhere else.

N26, Klarna and Revolut are not tech companies. Neobanks are still banks. And Klarna is just modern store credit cards. These have been around for decades.

Adyen is very underrated, and Spotify is definitely tech.

Stripe should be on the list. DeepMind at one point.

Stripe was founded in California. It's an American business that focused exclusively on the American domestic market in their first years of operation. Many tech companies in the US are founded by immigrants from Europe and elsewhere. That the Collisons chose to start their business in the States is no coincidence.

Many EU start-ups choose to launch their product in the US first due to the 300+ million people market speaking only English, rather than bother with the tiny fragmented markets at home.

It's just much cheaper and easier for start-ups if you're developing a SW product to sell it in the US market first and only when you've made money there, slowly bring it in the EU.

Starting off SW products in the EU is suicide (unless you're targeting some niche in the local market that's safe from competitors from abroad because it ties into some local idiosyncrasies on language, culture and law).

Revolut is as much a tech company as Netflix or Stripe are - using modern software to fix an old problem.

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